On January 12, 2020, the United States Department of Labor (“DOL”) released a final rule updating and revising the DOL’s interpretation of joint employer status under the Fair Labor Standards Act (“FLSA”). The rule is scheduled to be published in the Federal Register on January 16, 2020, and its effective date will be March 16, 2020. Links to the final rule, a related fact sheet, frequently asked questions, and the DOL press release may be found here.
In sum, the final rule addresses joint employer status in two factual scenarios. The first scenario is when an employee performs work for his/her employer that simultaneously benefits another person or entity, that person or entity will be considered a joint employer under certain circumstances. The rule provides a four-factor balancing test to determine FLSA joint employer status in this scenario. Specifically, the analysis considers whether the potential joint employer: (1) hires or fires the employee; (2) supervises and controls the employee’s work schedule or conditions of employment to a substantial degree; (3) determines the employee’s rate and method of payment; and (4) maintains the employee’s employment records.
The rule also clarifies that certain circumstances/factors do not make joint employer status more or less likely under the FLSA, including: an employee’s “economic dependence” on a potential joint employer; an employer’s franchisor, brand and supply, or similar business model and similar contractual agreements or business practices; and the potential joint employer’s contractual agreements with the direct employer requiring the direct employer to comply with the potential joint employer’s legal obligations or to meet certain standards to protect the health or safety of its employees or the public.
The second scenario is when one employer employs a worker for one set of hours in a workweek, and another employer employs the same worker for a separate set of hours in the same workweek. Although the jobs and hours worked for each employer are separate, if the employers are joint employers (or are “sufficiently associated”), the hours are aggregated and both employers will be jointly and severally liable for all of the hours worked for them in the workweek. The rule provides that employers will generally be sufficiently associated if: (1) there is an arrangement between them to share the employee’s services; (2) one employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or (3) they share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.
The rule also clarifies that certain business relationships—such as sharing a vendor or being franchisees of the same franchisor—are alone insufficient to establish that two employers are sufficiently associated to be joint employers under the second scenario. The rule also provides several examples applying the Department’s guidance for determining FLSA joint employer status in a variety of different factual scenarios.
The DOL may not be the only federal agency to revise/clarify its interpretation of the joint employer standard this year. In November 2019, the Office of Information and Regulatory Affairs, Office of Management and Budget released a “Fall 2019 Unified Agenda of Regulatory and Deregulatory Actions.” In their agenda items, both the Equal Employment Opportunity Commission (“EEOC”) and the National Labor Relations Board (“NLRB”) also indicated that they would be taking regulatory action related to the joint employer standards under federal EEO laws and the National Labor Relations Act, respectively. Employers will want to be on the lookout for EEOC and NLRB action in the New Year.
Only time will tell if these agencies’ recent and coming regulatory actions will create some consistency in determining joint employer status among the various federal labor and employment laws that the DOL, EEOC, and NLRB enforce.